Good evening. First quarter 2020 financial results conference call. This is Michael Partridge, Senior Vice President of Investor Relations for Vertex. Making prepared remarks on the call tonight, we have Doctor. Reshma Kewalramani, Vertex's CEO and President, Stewart Arbuckle, Chief Commercial Officer and Charlie Wagner, Chief Financial Officer.
We recommend that you access us the webcast slides on our website as you listen to this call. This conference call is being recorded and a replay will be available on our website. We will make forward looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and our filings with the Securities And Exchange Commission. These statements, including, without limitation, those regarding Vertex's marketed CF medicines, our pipeline and Vertex's future financial performance, are based on management's current assumptions. Actual outcomes and events could differ materially.
I will now turn the call over to Doctor. Reshma Kewalramani.
Thanks, Michael. It is an honor as Vertex's new CEO and President to welcome you to this conference call. The COVID-nineteen pandemic has been a significant challenge for people around the world. These are tough times. We know and we see We grieve with those who have lost loved ones and we salute the heroic work being done by those on the front lines of fighting the pandemic.
Acknowledging that this is a difficult time for everyone. I want to begin by telling you why we believe that despite the pandemic, the future of Vertex remains brighter than ever. In many ways, Vertex is a unique company, a company with a proven track record as a serial innovator with 4 approved CF medicines, including tricasta, a medicine we believe can treat up to 90 percent of CF patients around the world with high efficacy. A company with a broad clinical and late preclinical stage pipeline, using multiple modalities to treat and potentially fewer, serious diseases outside of CF. A company with current and future top and bottom line growth and a strong workforce.
In short, exactly the kind of company I want to be a part of going forward. At my core, I'm a physician scientist driven by a deep passion to advance science and medicine in the interest of patients. Since joining Vertex, I have witnessed the ingenuity and drive that have enabled this company to tackle unprecedented challenges in discovery, development and commercialization of new medicines. For example, our rapid advancement of our triple combination program through research and development and the early approval in the U. S.
Today, the majority of eligible patients in the US are already on Tricafka. It's hard to believe, but true that the original PDUFA date for Tricafka was March 20, 2020. Another example is pioneering the use of CRISPR gene editing, with our partners at CRISPR Therapeutics to potentially cure diseases like sickle cell and beta thalassemia. I am humbled to have the opportunity to follow Jeff in leading this unique company. Now onto our Q1 performance.
Vertex's business, as demonstrated in our record first quarter financial results announced today, is stronger than ever. Our Q1 CF product revenues compared to last year are up 77% to 1.52000000000 driven by the side the U. S. Our non GAAP operating income rose 133 percent to 877,000,000 Our strategy is working and we continue to grow our revenues and earnings, while also investing significantly in innovation. As we look to the future, First, our CF medicines are changing the lives of the patient populations they serve.
And by addressing the underlying cause of disease, they are an our medicines uninterrupted to CF patients around the world for the long term. Finally, while the course of the pandemic is unpredictable we retain a clear line of sight and in younger age groups and sustaining our CF leadership Our vision has been for TRICAFTA to be able to treat 90% of all CF patients, and that vision remains very much intact. Given the strong performance $1,000,000,000. Stuart and Charlie will review the factors underlying our new guidance in a few moments. Let me now turn to our pipeline and discuss how we are taking specific actions to continue as you will see, each program is somewhat unique and different.
1st, our regulatory and development teams have been working diligently to stay on track with We continue to make progress in our ongoing CF trials. For example, our CF regulatory team completed the submission of the sNDA in the as well as a Type 2 variation to the EMA in Europe for KALYDECO for infants with CF down to four months of age. Similarly, we have been able to progress our FSGS program. Our clinical team for our APO L1 mediated kidney diseases program have been able in the past few weeks to initiate our phase 2 study of VX-one hundred and forty seven in APOL-one mediated FSGS and we now paused enrollment or treatment in some ongoing clinical studies, including the phase 2 study of VX-eight fourteen in our AAT program. Every program and every clinical study is different, and we have analyzed each situation closely and have made decisions based on the need to keep patients safe and to respect the need to preserve the resources of the health care system for where they are needed most.
In addition to our clinical progress, we when it is possible to to protect employees and our facilities, our research labs have stayed open, and we have prioritized activities that are IND enabling for our next medicines starting our business development strategy and investing in external innovation. This week, we announced a new collaboration with Afinia Therapeutics. This collaboration supports the discovery and development of novel AAV capsids for in vivo delivery of genetic therapies in a number of disease areas. We are pleased to bring despite the pandemic, we continue to grow our senior leadership team with several important new hires and promotions in Q1. The first is Doctor Carmen Bozick, who was promoted to chief medical officer earlier this month.
Carmen now has responsibility for clinical development, medical affairs, drug safety, global clinical operations, biometrics and other related functions. Carmen has extensive experience in clinical drug development and joined Vertex in 2019 from Biogen, where she oversaw the development and regulatory approval of 9 important medicines, including TECFIDERA, and SPINRAZA. The second is Doctor. Vaziano Sana, who joined Vertex when we acquired Sema in 2019, where he was CEO. We have expanded Bastiano's role and he is chief of cell and genetic therapies at VERTEX.
In this new role, he now leads all of our gene editing gene therapy and cell therapy programs, as well as related technologies for sickle cell disease, beta thalassemia, DMD, type 1 diabetes, and others. Bosiano has extensive experience and expertise in cell and genetic therapies from prior roles at Magenta and Novartis. And I am confident that his skill set will enable us to build capabilities at Vertex that are second to none. I am absolutely delighted to have Carmen and Bastiano on the team. In summary, This extraordinary moment in time in which we find ourselves right now will pass.
We will all get through this together. Despite these unusual circumstances, Vertex is well positioned to continue to serve our CF patients, grow revenues and earnings and advance our pipeline of transformative medicines in disease areas beyond CF.
Let me turn it over to Stuart Thanks, Reshma.
I am pleased to review with you this evening our continued strong commercial performance in the first quarter of 2020. I am very proud of our commercial supply, market access, patient support, marketing and field teams, who were fully prepared for the early approval of TRICAFSA in the U S. And we also want to recognize the remarkable job that CF Centers And Healthcare Professionals have done to respond to both the approval and the high level of a very rapid and successful U. S. Launch of TRICAFTA for CF patients 12 years older with at least 1 F508del mutation.
Approved in October 2019, 5 months ahead of its PDUFA date, TRICAFTA has been widely adopted We have seen of the 18,000 eligible patients in the U. S. Total CF product revenues for Q1 2020 were $1,520,000,000 and in its first full quarter TRICAFTA accounted for 1,000,000 of those revenues. This was due in large part to more rapid Geographically, for our CF product portfolio, we recorded approximately $1,190,000,000 in revenues in the U. S, and US328 million dollars outside the US.
Growth outside the US was driven by strong patient uptake of ORKAMBI and SYMKEVI, following the completion of multiple reimbursement agreements in late 2019. In most countries outside the US, where our medicines are reimbursed, the majority of eligible patients have now initiated treatment. Based on our strong Q1 revenue performance, we have raised our revenue guidance for the year, as Reshma mentioned. The new guidance and range takes into account both the rapid uptake of Tricafter we have seen since October 2019 as well as additional dynamics First, we did see some benefit in Q1 from early prescription refills by patients, both in the U S and outside the U S. As well as advance buying from some government payers outside the U.
S. 2nd, while there are still new patients starting TRICAFTER treatment, the pace of initiation has slowed. A high percentage of currently eligible patients are already on track after in the U. S. And so we have reached the flatter part of the uptake curve.
Additionally, COVID-nineteen has resulted in some CF centers limiting their non emergency 3rd, given that we have only just completed the 1st full quarter of the Tricaster launch, we know that we have yet to see the full impact of persistence and compliance rates on the ongoing utilization of this medicine. As with all of our medicines, the revenue impact of persistence and compliance does not become fully reflected until several quarters after launch. Looking ahead, the focus of our efforts to serve patients is twofold: first ensuring that we can continue to meet the demand for our medicines with uninterrupted supply. Our team has closely analyzed our existing supply chain and has worked during the emergence of the pandemic to ensure that there was no change in our ability to provide medicines to patients. Our manufacturing facilities have remained fully operational and we have continued to produce new supply of our CF medicines.
We are confident that this eligible for and able to access our CF medicines We anticipate several important milestones in the coming 12 months which are SACAFTA triple combination is filed and under review with the European Medicines Agency. Approval by EMA significantly increase the number of patients eligible for the triple combination and enable us to begin reimbursement discussions across many European countries, as well as provide rapid access in some countries where we have a portfolio agreement. We have also now submitted the Alexa after triple combination for approval in Switzerland and Australia. Also in Switzerland, we have just entered a portfolio reimbursement agreement for both SYMDEKO and ORKAMBI, and we look forward to treating And with label expansion efforts, we are on track to submit the SNDA in the US for TRICAFTA for the treatment of CF patients aged 6 to 11 with at least one F508del mutation in the second half of twenty twenty. We are pleased with the rate of uptake that we have seen for TRICAFTA in the U.
S. And for ORKAMBI and SYMKEVI outside the U. S. We continue to see the potential to reach 90% of CF patients worldwide with TRICAFTA and we believe that this will continue to drive revenue growth for vertex in the future. I will now turn the call over to Charlie.
Thanks, Stewart. I will provide additional comments this evening regarding our Q1 2020 financial results and will also discuss our revised 2020 financial guidance. All of the results and guidance I will discuss are non GAAP. First quarter total CF product revenues were $1,520,000,000, a 77% increase compared to 2019. Tricapta sales in the 1st full quarter after launch were $895,000,000 and remarkably, Tricapta now generates more revenue and all of our other CF medicines combined.
The growth of TRICAPTA reflects rapid uptake among newly eligible patients as well as among patients switching from our other medicines. Importantly, ORKAMBI and SYMKEVI continue to grow outside the US, based on rapid uptake in were $328,000,000 outside the U. S, an increase of 51% over the prior year. Our first quarter 2020 combined R and D and SG A expenses were $477,000,000 compared to $388,000,000 for the first quarter of 2019. Overall, the combination of significant growth in revenues and more moderate growth in spending and operating income of $877,000,000, an increase of 133% compared to the first quarter of 2019.
Net income for the first quarter of 2020 was $674,000,000 compared to $296,000,000 in the first quarter of 2019. Now, I'll review 2020 guidance. Today, we are revising upward our 2020 financial guidance for total CF product revenues to a range of $5,300,000,000 to $5,600,000,000, which at the midpoint reflects 36% growth over 2019. This range reflects both the very strong tricap to uptake that Stuart described in his prepared remarks, as well as the moderating factors he described for unchanged. Now turning to capital allocation.
We finished Q1 2020 with $4,200,000,000 in cash, and our top priority for capital allocation remains and our thinking and strategy in business development have not changed. We are focused on programs and technologies that can accelerate the creation of transformational medicines for This week, we announced a new collaboration with Afinia Therapeutics. This collaboration gives us access to Afinia's innovative and novel AAV capsids and allows us to leverage their AAV expertise to advance the multiple gene editing and genetic therapy programs in development at vertex. Finally, as we look ahead through 2020, we expect our strong cash flow Now back to Reshma for a few concluding remarks.
In closing, it's obviously a difficult time for people and for businesses around the protecting the health and safety of our people and meeting the needs who are going above and beyond adapting to new circumstances and continuing to advance our R and D programs and helping our business outperform expectations. I'm also proud of our to help support the people and communities in which we including to the Boston resiliency fund and organizations around the globe, providing health supplies to frontline workers and to support vulnerable populations through food, care, and education. I look forward to sharing further news of our progress in the months ahead. Thank you.
And our first question comes from Phil Nadeau with Cowen And Company. Your line is open.
Thanks for taking my question and congrats on all the progress. Just two part question for me. First, you talked about the supply chain and manufacturing. Continuing that pace, are there any pinch points that you can identify in your distribution networks that could hinder our patients' access to your therapies, anything from not being able to get their deliveries at home to lack of ability to CAF Telemedicine reauthorizations for prescriptions that have already been written. That's part 1.
And then Second question is just on the pipeline. I think we're all focused on the AAT program. Do you have a sense when you'll be able to provide guidance on when the data from the Phase 2 study could be available? Thank you.
Phil, it's Stuart. I'll take the first question on supply chain and patient being able to get our medicines. And then Reshma will cover AAT. So, in terms of the supply chain and manufacturing, We don't see any pinch points really that are not anything that can be overcome. So far, as I mentioned in our prepared remarks, our manufacturing facilities have remained fully operational our ability to supply medicines around the world has continued clearly with things like commercial flights being reduced, there have been some challenges, but it's really delays of a number of days and things like that and certainly nothing that is disrupting patient's ability to get their med when they need them.
And so we continue to feel very confident that we're going to be able to continue to supply both patients who are currently our medicines and be able to supply launches if we get subsequent approvals. And with that, I'll hand it over to Reshma to handle the AAC question.
Yes. Phil, this is Reshma. Just to remind everyone, the study that you're talking about is the VX-eight fourteen study in the AATD disease area. This is a phase 2 dose ranging study, proof of concept study. It's about fifty people, 3 doses plus placebo, it's 28 days of treatment with another 1 month of follow-up.
So that's the study we're talking about. And you're right, we had temporarily paused screening and enrollment. And where we are today is that we are in the process of reinitiating screening and enrollment on a site by site country by country region by region basis in those areas that are opening and are now able to resume clinical trial activity. With regard to when will the results be available. So this now depends on dynamics around enrollment.
And we'll only know that when we have a little bit more time under our belt because as I said, it's site by site region by region country by country. We are in the process of reinitiating screening enrollment but we need a little bit more time to determine what those enrollment dynamics will what that is. It's just going to take a little bit of time. And when we know, I will certainly update you. That day is not today.
That's very helpful. Thanks for taking my questions. Thank
you. Our next question comes from Michael Yee with Jeffrey. Your line is open.
Thanks. And congrats on the progress as well. Great quarter. I guess two questions. Forward looking, you have a European approval potentially coming.
Can you just talk about how the dynamics of your existing portfolio deals were, reminding which countries have that in the pace and adoption of some of your recent other deals for the doublets could help accelerate the timing of uptake and launch in some of those other countries TRICAFTA. Maybe just talk about how you think about that versus the prior history of your other CF drugs in Europe this year? And then the second question relates going back to AAT, appreciate the comments. I see that you didn't mention VX-eight sixty four. Was there anything to say about that was that study completed?
Maybe just make a comment about that. I thought that was finishing phase 1. Thanks so much.
Yes, I'll take the question on reimbursement, Mike. Firstly, thanks for the congratulations on the quarter. We feel thrilled with how well the business has performed in this first quarter of 2020. In terms of the EU approval for the triple combination and reimbursement. As you know, we filed and the file was accepted in October of last year and is currently under review.
I really think of the access to patients outside of the U. S. Really being in kind of 3 categories. There's obviously a country like Germany, which provides immediate access while you then negotiate the price that they will pay you on a prospective basis. Then as you say, there's a number of countries where we have portfolio reimbursement agreements, that's countries like Ireland, Denmark also, we recently concluded a similar agreement in Switzerland All the portfolio agreements are all slightly different.
Some of them include just the currently approved patient populations some of them like in Ireland, for instance, also include the FMF population as well, but we would imagine that soon after getting regulatory approval, we would be working with those countries to get hopefully access very, very quickly after the regulatory approval. Regulatory approval really is the beginning of that reimbursement process. I do hope that our reimbursement processes can move more quickly. And I think there are some reasons to be optimistic about that, Mike, not least because we have reimbursement agreements in the vast majority of countries now. And that sets 2 things.
It sets a price in the marketplace and it also sets a profile of benefit risk in the marketplace as you know, we feel very good about the benefit risk profile of the triple combination compared to even our own transformative medicines. And so I'm hopeful that that will provide a tailwind, obviously, from a payer perspective, label dependent, the triple combination could increase the number of eligible patients. Would be an increase in budget impact and sure that's something we're going to have to negotiate with them. But that's how we see the reimbursement landscape playing out subsequent to regulatory approval. And on AAT, I'll throw it over to Reshma.
Yes. So Mike, thanks for the question on VFA 64. So VX-eight fourteen is the one we just went through where we had temporarily paused screening and further enrollment. That's the one where we're in the process of reinitiating both screening and enrollment. And that's the one that's already in phase 2 dose ranging.
VX-eight sixty four is the next molecule in our AATD program. That one has completed its phase 1 study. We've had to look at the safety and the PK. That one is going to be ready to go into its phase 2 proof of concept dose ranging study And I anticipate that that's going to happen in this year, the second half of this year.
Okay. Thanks for that. Appreciate it.
Thank you. Our next question comes from Salveen Richter with Goldman Sachs. Your line is open.
Good afternoon and congratulations on the launch as well. When you talked about guidance, you mentioned a couple of buckets here. And would it be possible to quantify on how to think about the early prescription refills and the, and the buying patterns from other countries that will pull forward. And then secondly, with persistence in patient compliance, where do you see that level typically, level off based on historically what's been seen with this franchise? And then thirdly, I guess, on the pipeline, should we expect 147 data in APOL1 mediated kidney disease to be on track for the year?
And maybe you could just frame for us what the clinical bar is here? Thank you. Yes. Salvi, let me ask Charlie to tackle the question around guidance. And then I'll come back and talk to you about 147.
Charlie?
Yes, thanks, Tobey. As you noted, we've increased guidance for the year to the range 5.3to5.6. And really the primary driver behind that is the success of the launch and the significant patient uptake and you see that reflected in Q1, that's it really mindful that folks not look at a single quarter performance extrapolate from there. So I think it's important, as Stuart outlined in the call, we did see some, patients refilling prescriptions early in the first quarter as well as some countries OUS accelerating their purchases, which resulted in a little bit earlier revenue recognition for us. We're not going to we're not going to dollarize that specifically, but I think you can conclude since we mentioned that it was significant enough, that we thought it was worth calling out.
And then, Stuart talked about the fact where we are in terms of the ramp up on patients, there are still some patients to get drug, of course, but the rate of new initiations is slowing and could see some delays to COVID. And then lastly, around persistence and compliance, I think that the way to think about it is when patients first initiate on a medicine, their persistence and compliance rates are essentially at 100% and that number only goes down from there over subsequent quarters until it's levels out at more of a steady state. And so we've talked about it in the past, persistence and compliance, the combination of those 2 factors, even if you're at 90 plus percent on both, you do the math on that. You can see that we have to come down from 100%. So Those will those will have an increasing impact over the balance of the second half of the year and is part of what we considered as we put the guidance together.
But importantly, the midpoint of the guidance implies 36% growth year over year. It's an acceleration over last year's 32% And so we are shaping up for another great year and it really highlights just how differentiated this business is, particularly at this very uncertain time.
Sami, this is Reshma. With regard to your question around 147, just to remind everyone, this is our program in APOL-one mediated FSGS and FSGS is a, APO L1 mediated FSGS, I should say that homogeneous kidney disease that is characterized by heavy proteinuria. And unfortunately for these patients, it's sort of a relentless course of a decline in kidney function with one of only, 2 outcomes. 1 is going on to dialysis or transplantation and the other one, unfortunately, is death. Clearly a disease with high unmet need.
This program, the key endpoint that we're looking for in terms of efficacy see is proteinuria, and we are looking for a decrease in proteinuria. The renal community regulators in the U. S. The FDA and academics and those involved in, research and kidney disease have had many conferences around the topic of endpoints. And I think it would be very fair to say that proteinuria which is the endpoint we are measuring in this phase 2 proof of concept study that I just described that we are now up and running in That would be the endpoint of importance in phase 3 and in terms of patients.
That's what we are looking for and that's what we're monitoring for. Thank you.
Thank you Our next question comes from Geoff Meacham with Bank of America. Your line is open.
Hey guys, thanks for the question and a big congrats on the quarter. Just had a couple Stuart, when I look at the guidance, the run rate is higher than your guidance. Is the delta primarily from the expected decline from SYMDEKO and ORKAMBI just switching to Tricato or is it that you guys are being conservative? And then beyond the 10% of CF patients you can't address today. Are there any updates to the commercial efforts to expand the Tricafta CF patient base for example, in Latin America, South Africa or other regions beyond the ones that you're expected to go in.
And then just for Reshma, real quick on the pipeline, have you guys been pretty active on the BD front and have a ton of different assets and indications, but the question is does the acceleration and the uptick and see if really changed your urgency or the size of future BD deals?
Sure. Chuck, let me ask Stuart to go first and talk a little bit about the, launch and some launch Amix. And I'll just make a quick comment. We have seen uptake of Tricasta in the U. S.
In all eligible population and we've just been so pleased to be able to serve all patients who are eligible. Stewart?
Yes, Geoff, as Reshma says, the uptake of TRICAPT has been very strong across all eligible patients and that includes, transitioning from our existing medicines where the indications are overlapping. So KALYDECO, ORKAMBI and SYMDEKO patients have been moving over from those medicines to TRICAFSA. In our results, that's obviously balanced by the growth we've seen outside the U. S. With ORKAMBI and SYMKEVI as it's called outside of the U.
S. Following the new reimbursement agreement. So we've really got that kind of those 2 different dynamics going on, some cannibalization in the U. S. And continued growth outside of the U.
S. As Charlie referenced earlier, we did see in the first quarter some early refills by patients and also some advanced purchasing by, some government outside the U. S. Presumably in response to the early days of the pandemic, that essentially is something that we would expect to sort of even out over the course of this year. In terms of the dynamic which we are anticipating could potentially play out for and compliance.
As he said, a patient when they initiate therapy, they're 100% persistence and persistent to be compliant. And as we know, Those numbers are only going to drift downwards, from there now. We expect them to be high with TRICAFSA because of the benefit risk profile. But those will have an impact on our negotiations into our revised guidance. And as Charlie said, at $5,300,000,000 to $5,600,000,000, That still represents at the midpoint 36 percent growth over 2019, which is actually an acceleration of the revenues we delivered in 2019.
So we're pleased to be able to increase our guidance at this uncertain time. And then on the kind of capital allocation and BD question, I think I'll hand that one over to Reshman.
Sure. So with regard to our strategy around BD, the truth of the matter is that the strategy is exactly the same and nothing has changed. And for those of you who haven't heard me say it or haven't heard us say it, let me just say it very simply We have 3 pillars in our BD strategy. The first is we look at anything that moves in CF regardless of modality, regardless of stage of development. The second is we look for early stage assets that fit into our corporate and R and D strategy and that fit into our SandBox.
And I say early stage because up until recently the assets in later stages of development have been fully priced if not overpriced and our ability to bring value is in our research development, regulatory and commercialization engine. And the third is to add tools to our toolbox. And you've seen us be very active in this area, including today's announcement with Afinia. We've done deals in, small molecules. We've done deals with AAV manufacturing.
We've done deals with, CRISPR as well as INCELL and other genetic therapies. And so those 3 pillars are going to stay exactly the same. Maybe what's changed for where we find ourselves in terms of time is what we bring to the table it's probably even stronger today than at any previous time. What I mean by that is we know exactly what we want, as I described. Our strategy is really very clear and it's been, it's been there for some time.
So we're very clear on what we are looking for The second is our capacity to do deals and our ability to consummate deals is, I think very strong and you see that that we were able to do the Afinia deal, the fight this COVID situation that is upon us. And the third is our balance sheet is strong and growing. And I think that is an important element in this moment in time.
Thank you. And we have a question from Paul Matteis with Stifel. Your line is open.
Great. Thanks so much for taking my questions. I wanted to ask one commercial question and one pipeline question. On the have to launch. I was wondering if you could comment on physician patient dynamic in the pandemic as it relates to prescribing.
Do physicians need to see their patients in person to prescribe this medicine and how might that vary in the U. S. And Europe? And then second, on the AAC program, I was wondering if you've had any evolving thoughts on what might constitute a great outcome in that study What AAT level threshold do you think is kind of a home run and almost unequivocal in its implications of clinical benefit versus what level range might be a little bit harder to kind of extrapolate as we think about future outcomes?
Hey, Paul. It's Stuart here. On the physician patient dynamic, for sure that physician patient dynamic has been disrupted by the pandemic for the reasons that you can imagine many of these positions are actually on frontline, certainly the adult pulmonary physicians of dealing with the pandemic. And as you well know, CF patients do fall into that category of patients who would potentially be vulnerable, were they to become infected? And so it certainly has disrupted the dynamic What we do know though is that physicians and patients have managed to maintain very, very active dialogue.
Many of moving to a more remote digital ways of interacting and those interaction levels are very high. Although, obviously, face to face interactions have been reduced in many places for all but emergency situations. That doesn't seem to have interrupted initiations too much in the first quarter given the strength that we saw in the first quarter But it is something that we are certainly conscious of and are aware may have an impact on the rate of future initiations, and it's one of the factors we've tried to take into account when establishing our revised guidance range. And AAT, I'll hand over to Reshma. Sure.
So what I can tell you is what are we looking for how will we know that we've had success with our proof of concept study, in AAT? So there are a few important parameters that we're monitoring as we think about the phase 2 dose ranging study. The first is safety. Obviously, this is the first use of the, correctors of the AAT protein in a population, people who have this disease. So safety is critical and it's right up there.
The second is PK and exposure. We're looking to ensure that we have the right exposure, that we have the right dosing interval and that we are seeing the kinds of impact that we are projecting based on our first in human study. And then lastly, and probably what you are alluding to is the AAT levels. And that's really important. What I'm looking for here with our studies is that the levels go up Not only in terms of antigenic levels, but in terms of the functional AAT levels.
And the reason I say that I'm looking for the levels to go up, and I'm not really focused on any particular number is this. You know, when we think about drug development here at Vertex, we really divided into cracking the biology and then pouring on the chemistry. In this disease area, unlike in CF, the stage that we're really at and the part that's very, very difficult is cracking the biology. And our ability to look at safety, exposure, and note that the levels of both antigenic and functional are going up tells us that we've cracked the biology. And then it's a matter of pouring on the chemistry and that is amongst the 2, the easier.
And I certainly don't mean to imply that the chemistry is easier, but it is the easier part of that equation.
Thanks very much.
Thank you. Our next question comes Alsia Young with Cantor Fitzgerald. Your line is open.
Hey guys, thanks for taking my question or 2 and congrats on a very good quarter. One, I guess, just philosophically, with what's going on with COVID, I mean, do you prioritize kind of the near term line the same way. I mean, some of this ties into what we've been talking about with AAT and getting that trial back up and running versus an FSGS. Certainly, people with lung may be a little bit more prone to these challenges. And then my second question, Justin, is that, I want you to talk a little bit about the Athena deal today and what you think that adds in your capacity in DMD and CF.
Thanks.
I think the you cut off just a little bit, but I think that the first question was around COVID and clinical trials
And Well, just I wanted to I
wanted to understand, like, if this changes the prioritization of your pipeline itself, like, in light of what this drop you have with your clinical trials studies,
some of them.
Sure.
So with regard to the COVID-nineteen situation, and our clinical trials. Our priorities remain very much the same. Our trials in CF are progressed and we've been able to continue that quite well. We've moved to telephonic visits. We've moved more to remote monitoring and such.
But obviously, our, the safety of our patients is our top priority. We're making sure that the integrity of our trials remain, but we have been able to continue our work in CF quite well. And the remainder of our pipeline outside of CF. As I said, the AATD program, we have already reinitiated our activities to have screening and enrollment restart in the 814 program. The FSGS program is actually exactly on time with the sites getting started up in April and huge credit.
I am so proud of our Vertex team that have just stepped up and gone above and beyond to get this work done. And if you think about clinical trials as a whole, as I said in my prepared remarks, disease area. Each study is quite different. It depends on the phase of the study. It depends on whether there is established benefit risk.
And it even depends on some more nuanced factors around whether the study sites are hospital affiliated, I. E. In the hospital itself. Or, separate institution, separate buildings. Of course, the disease area matters because physicians in certain subspecialties are more pulled into the pandemic than in others.
With regard to Affinia, what this really, is another tool in our toolbox and you've seen us methodically, carefully, and very deliberately go around and assemble what I think is really one of the best, if not the best toolboxes in the industry, this particular strategic partnership has to do with research activities to develop engineer capsids that have a greater affinity and tropism for certain tissues like muscle for DMD and DM1, as well as for some of our other disease areas of interest. And given the presence and our great interest in genetic therapies. This is a key tool in our toolbox.
Thank you. And our next question comes from Evan Ziegerman with Credit Suisse. Your line is open.
Hi guys. Thank you for taking my question. Congrats on the progress. So looking towards potential reimbursement negotiations outside of the United States for Tricata, assuming approval, do you see any risk of access delays or issues if government budgets are impacted due to the economic decline as a result of the ongoing pandemic? How flexible would you be to open up access for patients with these, given these potential economic issues?
Yes, thanks for the question, Evan. Clearly, the COVID-nineteen pandemic and government's responses around the world has put a significant strain on finances and non more so than in their various health services. And we'll have to see how that situation plays out obviously, we're not actually in those reimbursement negotiations in the vast majority of countries yet because those really only commence at the point of regulatory approval. So we'll really have to see what approach they take at that point in time. As Reshma said though in her prepared remarks, this is a situation that will pass over time, and we're really going to be negotiating reimbursement agreements, which are hopefully going to be long lasting because this is a terrific medicine, one that we feel very strongly has a an incredible benefit risk profile.
And therefore, we believe deserves to be rewarded with a premium price that is reflective of the value that it brings to patients. So, there's really not much more we can say about those discussions because we really haven't got into them with the various government authorities involved.
All right. Thank you for that.
Thank you. Our next question comes from Robin Karnovsky with SunTrust. Your line is open.
Hi guys. Thanks for taking my question. And I think you've done a great job sort of outlining a lot of the questions that we have. So great job in call for a job in the quarter. Just to follow-up a couple of things.
So, Reshma, I know you said that your business development, it hasn't really changed as far as strategy, but you did highlight that you have more capacity to deal to deals. You have more cash and your balance sheet is strong. So what does that mean? Does that mean we could see bigger deals over time? And second question is people believe Vertex is very protected given some of your patients or government reimbursed.
What are you seeing in the United States as far as any signals that there could be a disruption to reimbursement of your drug? In the coming quarters as COVID moves forward and people may have challenges with obtaining employment. Thank you.
Yes. Thanks for those questions, Robin. With regard to BD, what can you expect from us? You can expect us to continue to be disciplined. Our strategy is really clear to us.
And we're very, very disciplined about executing on the strategy as I laid it out You're right about the fact that our balance sheet is strong and getting stronger by the day. And you've seen us transact on a number of, deals, be it partnerships in the research arena or as you saw us do towards the tail end of 2019, 2 acquisitions, one with Axonics and 1 with Sema. And let me just tell you, I am absolutely delighted with both of those acquisitions and very excited about the integration that has and the more we get into it, the sweeter it gets. And so those have been very, very positive for us. The capacity that Charlie has been running those.
So our ability to do acquisitions and integrate, is also advanced. And the fact that we have done this have been recognized to be able to do it, I think, is something that will do well by us as we go forward. So can you expect us to do more deals? Yes. Will they be greater in number?
We're going to have to let some time pass, but that wouldn't surprise me. Are they going to be deals that are huge? Are we going to buy revenues? No. Though that's not part of our strategy and that's not what you're going to see us do.
And Robin, on the question of coverage here in the U. S. Actually, the majority of our payer mix is actually commercial rather than government During the course of the quarter, we really haven't seen any change in our payer mix. Obviously, that's something that we are monitoring closely sensitive to the increase in unemployment that there has been and that those uncertainties were one of the reasons why we widened our guidance range whilst at the same time increasing our guidance. We also widened our guidance range because there are a number of uncertainties that we are going to have see how they play out over time.
But certainly in the first quarter, we didn't see any change in our payer mix and or signals of disruptions to coverage for patients.
Thank you. Our next question comes from Mohit Bansal with Citi. Your line is open.
Great. Thanks for taking my question and congrats on the progress. Just moving a little bit on the pipeline side. Regarding your diabetes program, it seems like your approach uses a fully differentiated beta cell while there are other approaches including a progenitor cells. So could you please help us understand how these differences could ultimately impact the ant result And why one could be better than other growth share?
Thank you.
I think you're asking about, how our approach to type 1 diabetes and the cell program may be different from other approaches. And, let me, let me just tell you a little bit about our approach and then I can do a little bit of a compare and contrast for you. So, our program that came into us with our acquisition of Sema is really a program that is based on 20 plus years of work done by Doug Nelson, who is the preeminent beta cell physician scientists in the world and what the what Sema was successful in doing and the reason that we were so excited about the acquisition is they have found, a process and a methodology to not only develop, grow and in an industrial manner make pancreatic islet cells. These islet cells are fully differentiated And they have also come up with a technology that allows for a device in which these cells can be placed that can be put into patients with type 1 diabetes. And with the device, the big idea would be no immuno suppression would be needed.
Obviously, immunosuppression is going to be required for the naked cells. I would say that there are a few differences compared to other approaches, but the highlights of the following, the approach that we are pursuing pertains to fully differentiated island cells. And 2, that we have an approach here that has been tested in large animal models with the device that has shown itself to be a device that can be placed over time without the troubles that many others have seen.
Got it. Very helpful. Thank you.
Thank you. And we have a question from Cory Kasimov. With JP Morgan. Your line is open.
Hey, good afternoon guys. Thanks for taking my question. Just have one left for you on the topic of reimbursement. I wanted to ask about the ISA report on the cost effectiveness of Tricafka that was published earlier this week, we'd just love to get your thought on the current pricing versus their much lower recommendation? Why do you think there's such a big discrepancy?
And do you foresee or think as a risk of any pushback from payers a result of this? Thanks.
Corey, thanks for the question. As you know, we have and others have some significant methodological concerns with, ISA and the way it approaches an assessment of a medicines value, both the methods, some of the rather arbitrary thresholds that are chosen and really its inability to fully capture the benefits of transformative medicines with lifelong benefits like ours. So we do have concerns with the methodologies and thresholds, and I won't go into them in my new detail. In terms of the statistics, the most important statistic to me is that 99% plus of the patients who are eligible for TRICAFTER are covered by either government or commercial plans which are reimbursing the medicine. And to me, that's the most important statistic because it demonstrates that payers recognize the value of TRICAP and want to provide immediate access to it consistent with our label.
And if they hadn't done that, we wouldn't have been able to deliver the great quarter that we've had. And so we feel that's a much better mark of whether payers recognize value of TRICAPTRA and we are certainly going to be doing everything we can to ensure that the ISA report doesn't lead them to restricting coverage, which I think would be a tragic day for CF patients.
Okay, very helpful.
Thanks. If I
add a comment, Cory, this is Reshma. Tricacta is a medicine with absolutely unprecedented efficacy. The benefit risk is 100% clear. It is something that is recognized by physicians and patients around the globe. I do not expect any change in pricing or our approach in the U.
S. Or outside the U. S. You know that we have a long tradition of pricing our drugs for the value that they bring. And there is, just no doubt about the value that this particular medicine tricacta brings to patients
Very clear and helpful. Thanks a lot.
Thank you. We have a question from Brian Abrahams with RBC Capital Markets. Your line is open.
Hey guys, thanks so much for taking my question and congratulations on the strong quarter. Commercial question and a pipeline question. On the commercial side, any surprises in gross to net any additional inventory build given the rapidity of Tricap to uptake And might you expect any benefits on persistence and compliance due to COVID-nineteen such that it may those may drift down less than would have otherwise been expected And then on the pipeline side, with the PKPD characterized for 864, just curious if there's any additional insights that you guys have on similarities and differences versus 814? Thanks.
Why don't I ask Stuart to just comment on persistence and compliance? And then I'll ask Charlie to comment on the rest of your question. Stewart?
Yes, Brian. On persistence and compliance, as we said in our prepared remarks, we did see patients refill early in the quarter, both here in the U. S. And ex U. S.
And so mathematically that is an increase in compliance. However, we do expect that that is going to kind of play out over the course of the year. And I don't expect that, COVID 19 will really have a substantial impact on persistence and compliance of TRICAFTER. I think the thing that's going to drive the levels of persistence and compliance are the exceptional benefit risk profile that Reshma just mentioned. And then on the gross to net and inventory changes, I'll hand that over to Charlie.
Yes, Brian, on gross to net, nothing noteworthy in the quarter. The gross to net moves around a little bit from quarter to quarter depending on when we true up invoices that come in, but nothing noteworthy in the quarter here. And then around inventory, I guess I would distinguish, you'll recall that in the fourth quarter, we talked about in, launch related inventory build that was more of a channel inventory build. And what we're talking about here, as we're giving color on the first quarter results and on guidance, is more of a, excuse me, more of a patient driven or a government driven inventory build, which is different from the channel build that we talked about in the fourth quarter. There's no incremental color in the first quarter on the channel inventory that has not changed significantly and is not part of the color.
That we're giving on the first quarter.
Operator, now that we're past 6 pm, we have time for just one more question.
We have a question from Matthew Harrison with Morgan Stanley. Your line is open.
Great. Good evening. Thanks for fitting me in. I was just, Stuart, I was just hoping maybe you could help us think about phasing of revenues broadly as we think about pushing into the younger patients as well as Europe, just maybe remind us about the sizes of those populations relative to the population that you currently penetrated with TRIC after? Thanks.
Yes, thanks for the question. Obviously, from a long term perspective, We believe TRICAFTA has the potential to treat up to 90% of CF patients because of the levels of efficacy we are able to deliver. And clearly to do that, we need to do a couple of things. 1, we need to get it approved outside of the U. S.
For 12 plus population. And then obviously, we need to increase the label there to expand it down into lower age population We have submitted the in the back end of last year, in Europe for TRICAFTA or the triple combination I should say for the 12 plus population. No, the label we are going to get there yet. So it's really impossible to tell you exactly how big the size of the eligible patient population is there. We have more recently also submitted in Australia and Switzerland, again, for 12 plus In terms of the label expansions, in terms of taking the age range down, the 6 to 11 Tricaster sNDA, here in the US, we anticipate submitting in the second half of this year.
So really the primary drivers of our guidance and the increase in our guidance are really tricaster in the 12 plus population here in the U S and the growth that we've seen in ORKAMBI and SYMKEVI outside the U S as a result largely of the reimbursement agreements that we put in place in the second half
Thanks everybody for joining the call tonight. The Investor Relations team is either in the office or remote and we'll following up with, analysts who didn't get a chance to ask a question as well as any other questions you may have tonight. Really appreciate you dialing in and stay safe.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.